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WTI holds gains around $96.00 as the Strait of Hormuz remains largely shut

  • WTI surges more than 3% as the Strait of Hormuz remains largely shut on Tuesday.
  • A drone strike sparked a fire at the UAE’s Fujairah Oil Industry Zone.
  • US allies hesitate to deploy warships to escort tankers through the strait.

West Texas Intermediate (WTI) Oil price recovers its recent losses registered in the previous session, trading around $96.10 per barrel during the European hours on Tuesday. WTI price surged more than 3% at the time of writing, driven by renewed supply concerns as the Strait of Hormuz remains largely shut and US allies resist deploying warships to escort tankers through the vital chokepoint.

Iran has intensified attacks on regional energy infrastructure. A drone strike triggered a fire at the UAE’s Fujairah Oil Industry Zone, though no injuries were reported. Middle East crude benchmarks have climbed to record highs, becoming the most expensive globally, with traders attributing the spike to tightening supply.

Most countries have so far pushed back against US President Donald Trump’s call to send naval escorts through the strait, drawing criticism from the president, who accused Western allies of ingratitude after years of support.

Despite the earlier rally, WTI price dropped more than 4.25% on Monday after several tankers safely transited the Strait of Hormuz over the weekend, raising hopes for a potential reopening. India is also negotiating additional vessels, while several nations engage in back-channel talks with Iran to secure safe passage. Meanwhile, the US continues to allow Iran to ship crude through Hormuz, and reports suggest a direct communication channel between Washington and Tehran has been activated.

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

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Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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